Myanmar Business Survey : Data Analysis Policy Implications

Myanmar is emerging from decades of military rule, central planning and economic isolation as it implements political and economic reforms and, as a result, faces fewer international sanctions. The country has great potential for rapid development due to its vast natural resources, abundant labour force and geostrategic location

Capitalizing on these assets to achieve its goal requires well-implemented regulatory and institutional reform. To assist in these efforts, ESCAP and OECD conducted a multi-dimensional policy review of Myanmar from

the end of 2012 in coordination with the Government of Myanmar.2 During the policy review, the lack of information on the business conditions on the ground was found to be a serious impediment to the development of appropriate polices. To address this issue, ESCAP and OECD carried out a business survey jointly with the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).

The survey provides a rich dataset of more than 3 000 frms in all sectors and geographic regions to help in understanding the characteristics of frms on the ground, their business environment and the challenges they face. This publication explores the survey results in depth, in order to develop policies that address these challenges and promote private sector development in Myanmar.

The survey results are discussed from various key perspectives of businesses in order to identify effective policy prescriptions. They include the business environment, market conditions, innovation, human resources, access to fnance, productivity, corruption, agribusiness and food industries, which are briefy summarized below.

1. Business Environment

The development of an enabling business environment is crucial to the promotion of growth, productivity, employment and well-being. Although the country has instituted various reforms since the early 1990s the regulatory and policy framework remains fragmented. Permission from parallel line ministries is often required and coordination is reportedly lacking. This has led to the growth of a large informal sector, which makes conditions very diffcult for small and medium-sized enterprises (SMEs). The survey results have revealed wide-spread dissatisfaction with several aspects of the business environment. Corruption, access to skilled labour, technology and access to land are most frequently cited as very severe obstacles faced by businesses in Myanmar. Access to fnance is also found to be a major obstacle, especially by SMEs. Although infrastructure such as access to electricity and water supplies are not rated as severe obstacles overall, they are more severe in some geographical regions. The Government of Myanmar will therefore need to streamline administrative procedures for obtaining registration, licences and permits perhaps by providing a “single-window” service, which will also reduce the opportunities of irregularities. Infrastructure must not only be improved but also distributed equitably throughout the nation with a specifc industrial zone development plan. Specialized assistance should be provided to entrepreneurs and SMEs in addressing issues such as access to fnance and bureaucracy.

2. Market Conditons

As the country opens its borders and prepares for regional integration, it must be ready to face opportunities as well as challenges. Enhanced trade could bring huge benefts to the economy but frms will also face stiff competition.The survey shows that frms still have more localized concerns, as they do not fnd issues such as foreign competition and international sanctions to be very severe obstacles. Firms are also ambivalent with regard to the launch of the ASEAN Economic Community (AEC).The Government must spread awareness of the potential benefts and challenges of regional integration. Improving productivity, quality and management is crucial to being able to compete globally. Access to foreign investors and trade fnance will be very useful for SMEs.

3. Innovation

Innovation is widely regarded as a key element in quickening the pace of development and growth in any country. For example, the use of transformative technologies such as the Internet has been shown to have dramatic effects on gross domestic product (GDP) growth in many developing countries. As frms in Myanmar become exposed to global competition, it will be increasingly important for them to develop innovative products or services as well as utilize technology more effectively. However, investment in research and development (R&D) remains low in Myanmar and the country has performed poorly in international rankings of innovation capabilities. Firms reported in the survey that they considered innovation to be important, yet few in fact spend much money on it. Firms do not appear to be using intellectual property (IP) protection as much as they should with many reportedly relying on trust between staff members to safeguard their innovations. These issues could be addressed by subsidizing expenditure on R&D, streamlining patent applications, disseminating information on the benefts of IP protection and improving enforcement of IP.

4. Human resources

A modern economy requires a workforce that is well-skilled. Myanmar currently spends less than its peers on education and has fewer tertiary graduates. The quality of education is also of concern. The survey helps in identifying areas where skills are lacking. Technical and professional skills are needed in the manufacturing and services sectors. Computer and ICT skills are required by micro- and small-sized frms. Larger frms require more communication and interpersonal skills.Although Myanmar provides relatively favourable business environment to women, their participation in the business sector can be further enhanced with well-designed public interventions. Such actions may particularly focus on the skill development of women entrepreneurs and managers.Addressing these challenges requires increased funding to the tertiary sector together with greater accountability and quality assessments. Vocational training institutes, public administration and management schools and e-education programmes could be developed in association with the private sector.

5. Access to finance

The fnancial sector has long been tightly controlled and overly regulated. The types of fnancing instruments available to private enterprises are limited with unreasonably high costs. Many turn to informal money lenders instead. The Government has attempted reforms but the pace has been slow as it is a diffcult task.More than half of the survey respondents reported that fnancing options were inadequate. Stringent collateral requirements, complicated application procedures, small loan sizes and high interest rates are reportedly the biggest fnancing obstacles. Informal lenders provide loans at very high interest rates and require greater trust while accepting a wider range of collateral.The Government must complete the reform process by reducing regulation and allowing banks more fexibility. While the local fnancial sector is upgrading rapidly, the Government must foster their institutional capacity by providing various technical and fnancial assistance. Foreign banks should be allowed to operate in the country to encourage competition. Informal lenders should be integrated into the formal system; SMEs should have access to subsidized loans.

6. Productivity

After decades of being sheltered from global competition, productivity remains low in Myanmar. The economy is still dominated by agriculture, which is still a low-productivity sector. Productivity in other sectors is also low by international standards. Improving productivity is crucial to achieving rapid growth. The survey shows that smaller frms tend to have a higher level of productivity (measured as gross revenue per worker) compared with larger frms. Hotels and restaurants report a much higher proft margin, on average, compared with that of frms in other sectors. Many of the policies discussed above will also have an impact on productivity. Access to skilled labour, fnance, innovation and technology will lead to dramatic improvements in productivity. Further interventions at SOEs (and former SOEs) that encourage the adoption of modern managerial and production techniques and practices will also be useful in improving productivity.

7. Corruption

Corruption remains one of the most signifcant challenges facing Myanmar. The Government has attempted reforms through a new Anti-Corruption Law and Anti-Corruption Commission; however, the country is still ranked 156 out of 175 in Transparency International’s Corruption Perception Index 2014. Corruption was most frequently cited as a very severe obstacle by the frms surveyed. Bribery is reportedly more common among larger frms as well as frms in the extractive industries sector. Firms that pay bribes, particularly younger frms, do so because they fnd red tape to be a more severe obstacle compared to frms that do not, suggesting that red tape may be used as a way of extracting bribes. Although regulatory and legal approaches are important, the root causes of corruption must be addressed. Excessive regulation across the board must be reduced; administrative processes streamlined; accountability of public offcials enhanced; and transparency improved.

8. Agribusiness and food industries

The agribusiness and food industries are a key strategic sector in Myanmar’s socio-economic development, having long played an important role within the nation’s economy. The sector has several unique characteristics. They are dominant industries in rural areas while contributing to the economy through exports of agro-products; thus, the sector is the key to equitable and inclusive development in Myanmar. The average age of frms in this sector is older than those in other sectors, thus confrming its status as a traditional industry of Myanmar. Whereas the sizes of frms in the sector are relatively bigger than frms in other sectors, the agribusiness and food industries appear to make less proft than that earned by businesses in other sectors. The sector relies on informal lenders who are available in rural areas. Some special interventions in this sector may be appropriate for enhancing its exporting contribution as well as rural development.

Conclusion

Myanmar faces several challenges in its transition to a modern economy. The information in this publication provides the much-needed perspective of businesses on the ground in Myanmar, the conditions they experience and the obstacles they face. The policy suggestions contained herein, if implemented, will address these obstacles and help to create an enabling environment that will allow frms to fourish and will promote growth, employment and development in general.

The overall purpose of the research is to document and assess the information collected that can give us an indication of the LED framework, policies and practices and, most importantly to understand the needs for capacity development for a more inclusive and equitable growth of Greater Mekong Sub-region (GMS) with the goal in contributing to rapid local economic development and inclusive growth along East-West Economic Corridor (EWEC)of the GMS.

The research work is being conducted through desk review of available sources of information. Interviews of LED and related stakeholders were being conducted to obtain their perceptions on LED framework, policies and practices. In order to obtain the current LED results, a Compass Workshop was conducted with relevant stakeholders from the government departments, private enterprises, and NGOs which are contributing to the local economic development.

To assess LED capacities among officials involved in Kayin Sate LED process, an institutional analysis and LED Actor Mapping was conducted using individual interviews and the Compass Workshop. In assessing current knowledge, skill, and attitude of LED officials individual analysis and a CDNA Survey was conducted. In order to identify capacity needs of these officials internal assessment was also conducted.

After receiving the Training on LED Research Framework and Methodology which was conducted at Mekong Institute from January 14 to 18, the National Consultant developed research work plan and the activities involved desk review, conduct of individual interviews as per research matrix, CDNA Survey and Compass Workshop in Hpa-an, capital of Kayin State, Myanmar. Work began on 20 January 2014 and ended on 19 March 2014.

After years of conflict the economy of Kayin State has been very weak, particularly the agriculture sector, and there is a severe lack of motivation in the agriculture sector. In addition to the problems of conflict, the State has been encountering frequent floods in the rainy season and scarcity of water for its agriculture in the dry season.

Maize has market potential for farmers and there is high demand for the product from animal feed factories in Thailand. Other crops such as green gram, sesame and groundnut could easily find market if quality product and value change devel opment is assured.

About 93 percent of respondents in the CDNA survey say they are involved in LED processes with 60 percent in the implementation process and 50 percent in the sensitization process. The majority of those who are directly involved are government officials.

Fiscal decentralization has improved things better as local government is able to have some opportunity of making decision and things move faster, and grassroots community benefit from such progress. However, decision making power final responsibility is still with the national level authority. There is a relevant national LED strategy and programs for sub-national territories. But sub national level needs both financial and technical support from the national level. Government departments at state level like DOA, Department of Trade Promotion, especially Chief Minister's office, Myanmar banks, and other organizations like KSD, NGO, INGO, CCI are the institutional drivers. It is found that local stakeholders shared vision, understanding and participation in development of LED.

This is done through discussions and sharing experiences and information in weekly and monthly meetings. Stakeholders have been sensitized and awareness has already been raised. Thus local stakeholders take ownership of the LED process, as they initiated the activities themselves and implemented the activities themselves.

The private sector is taking increasing role and initiative in LED (e.g. it is involved in the set up of industrial zone and infrastructure development). But some feel that members of the private sector are working on individual basis, and needs to be more mobilized and organized to participate in LED.

Currently there are initiatives to improve local tourisms in Kayin State. Value factors include better services for tourists through hotel services, transportation services, guide services, entertainment services and so forth. However, Kayin State still lacks the technology to refine its goods and value chain development, hence needs further greater efforts and external help.

There are attempts to do LED in an eco-friendly way. For example, when a company is to enter into an agreement with the State Government, it needs to do the social and environmental impact assessment. Only after the clearance is received, the State Government would let the companies to work in the local area.

There are measures taken for local people to be sensitized in order to increase participation. For local officials and those who are direct stakeholders, the Chief Minister exhorted them to participate in LED initiatives in official meetings, and for the public the CM in his rounds of field visits to townships and villages informed the people about the importance of people participation in LED activities. For both the government officials and the people a committee called Planning and Implementation Committee lead the sensitization initiatives. LED activities design includes agriculture, livestock, fisheries, trade promotion, and infrastructure development including capacity development. The focus area is griculture.

Under the leadership of the CM's office, relevant stakeholders come together to work together. At its annual planning sessions or at appointed meetings LED stakeholders come together to discuss their respective plan and how they could find synergies between LED activities. LED actors, specifically among the government officials do have to some extent understanding of LED. Non - government LED actors could have a lesser understanding.

It is generally perceived that there is no gender discrimination issue in Myanmar society, It is however necessary to improve LED actors' capacity on mainstreaming gender to keep abreast of the changing world and gender issues.

Major difficulties and constraints that affect the results of LED mentioned include 1) Peace an d stability, 2) Shortage of manual labour , 3) Shortage of agricultural inputs, 4) Lack of technology know-how, 5) Lack of investment, 6) Inadequate infrastructure (transportation, communication, electricity services), 7) Loan takers unable to repay loans, 8) Unstable agricultural harvest prices, 9) Poor land quality, 10) Due to more income gained as migrant workers, people do not want to work in local areas and in traditional livelihoods such as agriculture and livestock.

Appropriate measures for controlling floods in the rainy season and provision of adequate water for crops cultivation in summer should be developed and addressed by the government with the assistance of external help. There is an urgent need to improve its infrastructure if local economic development is to be achieved.

State Parliamentarians should lobby for further fiscal decentralization so as local government will be able to have increased opportunity of decision-making. Kayin State has a considerable natural resources and a potential for improving its economy through agricultural, livestock and trade promotions.

If State level actors have increased decision making power in LED, and its resources in both skill and financial are adequate, then it could perform effectively and efficiently in its LED initiative processes. The State Government should enlarge its institutional drivers outside its sphere of authority to include members from non-government organization for increased participation and inclusiveness in LED initiative process.

Untimely rains and floods in rainy season are the main constraints and difficulties in maize farming. Appropriate measures for controlling floods in the rainy season and provision of adequate water for crops cultivation in summer should be developed and addressed by the State Government with the assistance of external help.

Additionally, Local KED actors need to constantly upgrade their understanding of their economic reality and of LED through the cooperation with international capacity building organizations.

To spur the increasing role of private sector in LED process, the government needs to devise the strategy to mobilize them as well as to enable them to be better organized in LED participation process. Kayin State LED stakeholders should continue to cooperate with other states and regions to increase its effectiveness and impact. Myanmar has now opened up for cooperation with the outside world, and both the Myanmar Government and the international organizations should take this opportunity to work together for a ‘Win Win' approach thereby advancing the development of Myanmar, particularly the Kayin State which is recognized for having immeasurable potential economic growth in the near future.

Rapid Needs Assessment Report North-South Economic Corridor

The main purpose of this study is to provide an update of the NSEC logistics study conducted in 2008. It will be based on empirical data gathered in the field and aims to assess the capacity of key stakeholders involved to transform the NSEC from a transport corridor into an economic corridor. The goal is to propose policy recommendations to bridge the human capacity gap in order to attain this target.

Labor migration is considered to be one way to reach the goal of poverty reduction and economic development by the Vietnamese Government. The Government has been trying to expand its overseas labor market. However, Vietnamese migration to the countries in the Greater Mekong Subregion has receives less attention from policymakers. Many Vietnamese migrants cross the border with countries in the region illegally for working purposes. This spontaneous migration process has implications for the socio-economic development of the origin as well as the destination country.

This research was conducted in two poor communes in Thua Thien Hue province, Vietnam where the number of migrants travelling to Lao PDR for work is the highest in the country. Focusing on spontaneous migration to countries along the East West Economic Corridor (EWEC), the field survey was administered to 250 migrants and state officials. The study results show the economic potential and social challenges of spontaneous migration from Vietnam to other countries in the EWEC. Easy transportation to EWEC countries, fast and cheap official document processing at the border and the availability of jobs at the destination are identified as the potentials of labor migration. The study also explores the role of social networks in supporting this process. It considers the social links with the origin and destination country and between the migrants and those who stay behind. Social networks are seen as providing protection and security for migrants at their destination. However, migrant workers have to face numerous challenges during their migration, including difficulties in accessing social welfare in their destination country, being abused, exploited and becoming illegal workers due to the lack of legal documents. The research finds that spontaneous migration to EWEC countries is a survival strategy for the poor in Thua Thien Hue province. Therefore the study suggests that in developing a national poverty reduction strategy policy makers and development aid agencies should pay more attention to the spontaneous migration of the poor.

Impact of Land and Forest Policies on the Livelihood of Ethnic Minorities in Lao PDR

Along with other GMS countries Lao PDR has adopted land and forest policies aimed at reducing poverty. In 1996, the Government of Lao PDR (GoL) officially adopted a nationwide program on land use planning and land allocation (LUP/LA). The aim of the program was to provide villagers with access to additional land resources as well as at safeguarding the nations forest areas. The LUP/LA program has now been drastically decreased due to budget constraints after having been implemented to varying degrees in most parts of the country. Implementation of LUP/LA varied throughout the country, but studies on the impacts have shown that several of the expected results have not been achieved. It is reported that in general, LUP/LA has been beneficial in the delineation of village boundaries and resource use zones, has helped to reduce land conflicts and improve forest protection. On the other hand, land allocation has led to a reduction in agricultural and forest areas available for use by households living in upland areas. In many cases this has resulted in decreased yields and insecure livelihoods.

"Reassessment of the land-forest allocation programme is needed, particularly as it is applied to upland areas where shifting cultivation is widespread; there are shorter fallow periods and population pressures because of declining yields and the hardship experienced in some upland areas." (Lao PDR NGPES).

This study confirmed most of the impacts identified in previous surveys.

The GoL's strategy for the development of remote areas has been to push for "economic integration."This has translated into a policy of swidden agriculture eradication, which is commonly understood to be an important way to develop the uplands. Following the GoL line, swidden is focused on producing a diversity of crops for subsistence which keeps ethnic minorities poor, especially where fallow cycles have been reduced. Thus, the villagers have to be taught how to farm like lowland Lao farmers - to focus on a narrow range of crops in order to produce a surplus which will generate cash, increase market linkages and decrease poverty. Recognizing that many upland areas are unsuitable for paddy cultivation, and given the remoteness of so many upland minority villages, thousands of villages have been resettled - often with disastrous consequences due to the lack of support during the actual move, lack of basic infrastructure in the new villages and difficulties faced by the communities in adapting to new environments, diseases and agricultural practices. Its not surprising, then that the figures from many studies conducted in Laos show an increase in all poverty indicators, including decreased food production and increased mortality rates in new villages.

In recent years, Laos has experienced an increase in demand for its main national resource, the countrys land. Huge areas of land have been conceded to foreign investors, mainly to Chinese and Vietnamese rubber plantations. These land concessions have put further pressure on upland minorities by increasing land scarcity and reducing forest areas which are vital to these minorities livelihoods. Furthermore, there lands has often been conceded to the foreign investors - sometimes without any or with too little compensation - leaving villagers as day laborers on their own land with no alternatives means of livelihood.

This study seeks to contribute to a better understanding of how institutional arrangements governing ethnic minorities rights to access and control over land and forest areas impacts on their livelihoods, based on a field study in 5 ethnic minority villages in the Sekong province.

Keywords: Land Policy, Land Rights, Land Concessions, Land Titles, Lao PDR